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How to Handle March Madness in Your Office

Written by: Kathryn Tuggle03/29/13 - 9:00 AM EDT

NEW YORK (TheStreet) -- Managing employees can be hard enough without having to break up illegal gambling at the office, but during March Madness that's exactly what many supervisors find themselves doing. While a little sports rivalry and even casual betting can be a fun break-room pastime, serious betting can lead to loss of productivity and even hostility among workers.

Thankfully, there are solutions for managing March Madness without looking like a tyrant or appearing too permissive. In fact, some companies actually reap a benefit from the month's activities, with 20% of businesses reporting an increase in employee morale, according to a recent survey by staffing company Office Team. The majority of companies -- 75% -- reported that March Madness events have no impact on morale or productivity, while just 4% of businesses viewed the activities negatively.

"Most employers view March Madness or other office pools as relatively harmless and not at all a cause for concern. The problem with this approach is that it ignores some practical and legal issues," says labor lawyer Tim Scott of the New Orleans office of Fisher & Phillips.

An employer or managerial official should never sponsor an office pool that requires subordinate employees to contribute their own money to the pot, Scott says. Such pools are illegal in most states where they involve betting on collegiate or professional sports.

"Further, this could give rise to a legal claim asserted by an employee opposed to gambling for religious reasons or could cause morale issues to the extent that feelings are hurt about how the pool is operated or who is invited to participate," Scott says.

With that said, some companies have had good experiences sponsoring their own pools that do not require any investment on the part of employees, Scott says. Instead of money, prizes can be given out to people who have the most successful (or even least successful) brackets.

"This is a good way to promote morale and build teamwork," he says.

But what happens when group of employees take it upon themselves to start their own pool?

"It depends on the situation, but generally speaking I would counsel managers to permit the office pools," says Anthony Campiti, an attorney and partner in the Dallas office of Thompson & Knight.